Amid an exodus of business partners, board members and creative talent, leaders of the embattled Weinstein Co. are divided over the next step for the company that has been shaken to the core by explosive allegations of sexual assault and harassment at the hands of its co-founder and former co-chairman Harvey Weinstein. Industry observers said some form of bankruptcy reorganization is becoming increasingly likely as the company’s prospects deteriorate.
TWC co-chairman Bob Weinstein and COO David Glasser are said to be advocating a batten-down-the-hatches strategy while the law firm hired to investigate the growing number of claims about Harvey Weinstein’s alleged misconduct completes its work. Sources said the two believe they can be exonerated of accusations that they knew of the worst allegations against Harvey. But other TWC board members are said to be pushing for the company to begin a sale process.
Another scenario that has been widely speculated is that TWC will volunteer for or be forced by creditors into a prepackaged Chapter 7 or Chapter 11 bankruptcy reorganization. That could give the company some relief on what is believed to be a significant debt load while allowing new equity players — and likely new management — the chance to come into a cleaned-up balance sheet.
Industry sources said given the fact that the Weinstein Co.’s ability to move forward with new projects has significantly diminished in the past week, since sexual harassment allegations against Harvey were detailed by the New York Times and the New Yorker, the banks behind the $400 million senior credit facility that TWC lined up last year are surely getting antsy. Those lenders include Union Bank and Irvine-based Opus Bank. Sources said it would not be a surprise for the senior lenders to ask for a trustee to be appointed to begin the reorganization process.
Late Sunday night, Harvey Weinstein was fired from the company he launched with his younger brother in 2005. Earlier this week, Harvey’s name was dropped from the credits of TWC’s current slate of TV shows. But as of today, TWC’s network partners began dropping the company’s title card from the shows, an indication that the cost of the scandal is growing. Amazon is in the process of trying to buy out TWC’s interest in two upcoming drama series, “The Romanoffs” and the untitled David O. Russell drama series starring Julianne Moore and Robert De Niro.
“The company is in complete turmoil,” said a veteran entertainment banker. “Whatever survives is not going to be the same business and it’s not going to be the same management team.”
Another experienced media investor suggested that a sale process should begin immediately to capitalize on the value of individual assets, notably the reality TV franchise “Project Runway” and its spinoffs, before the damage from the scandal gets any worse. This person noted that there is a lot of private equity money chasing content businesses at the moment.
“A (piecemeal) fire sale would be the best way to wring what you can out of it,” the investor said.
The extreme skepticism about whether the current management regime and board can survive in any form deepened when it was revealed by the New York Times on Wednesday night that board members were aware of settlements paid by Harvey since at least 2015.
Many industry observers have said it strains credulity to suggest that Harvey’s brother and longtime business partner Glasser had no knowledge of behavior that left the company open to big-time liability and damage to its standing in the marketplace. Those fiduciary concerns were likely a factor in the resignations last week of Weinstein Co. board members Tim Sarnoff, Marc Lasry and Dirk Ziff.
Moreover, the steady stream of women who have come forward with additional allegations of harassment from Harvey — including boldface names such as Gwyneth Paltrow, Angelina Jolie, and Cara Delevingne — have made it extremely unlikely that filmmakers and creative talent will look to partner with the company in the near term. Already, the marketing and promotional plans for TWC movies awaiting release has been compromised. On Thursday, Michael Mitnick, writer of “Current War,” a drama that TWC had hoped would be an awards contender, had to bow out of a planned New York Film Festival panel to avoid questions about the mushrooming Weinstein scandal.